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A New Cold War With China? No, Thanks

(The Bloomberg View) -- This weekend’s G-20 summit in Buenos Aires matters less for the main proceedings than for U.S. President Donald Trump’s expected encounter with Chinese President Xi Jinping. Trump has lately seemed intent on escalating their quarrel over trade, and Xi has shown no sign of backing down. With neither side willing to compromise, the dispute runs the risk of causing a complete breakdown in U.S.-China relations, and poses the single biggest threat to global peace and stability.

Understand, this isn’t just about Trump. In the background stands a new consensus on China. Opinions have shifted with bewildering speed. As little as a year ago, trade-policy experts and longtime China-watchers mocked the president’s obsession with the trade deficit and opposed his threatened tariffs. Now, without moderating their contempt for Trump, many liberal internationalists and advocates of open markets seem to agree with the administration’s hard-liners. They see China as a grand strategic threat — one that needs to be confronted, much as the Soviet Union was confronted during the Cold War.

The new consensus is wrong.

To be sure, China has given the hawks plenty of material. In recent weeks, it has blocked consensus and bullied delegates at the Asia-Pacific Economic Cooperation summit; harassed a U.S. Navy vessel on the open seas; arrested the Chinese president of Interpol and students agitating for workers’ rights; continued to shrink the space for open debate in Hong Kong; and, ignoring a global outcry, whitewashed the re-education camps in which a reported million Muslim Uighurs in western China may have been incarcerated.

This is not to mention the longer-term ways in which China appears to be threatening U.S. interests and the liberal international order. Its mercantilist economic policies, including the forced transfer and outright theft of technology from foreign companies, have strained the global trading regime to breaking point. Its Belt and Road infrastructure push has added to a dangerous pileup of developing-country debt. It has bullied Taiwan, and defied United Nations rulings against island-building in the South China Sea. U.S. Vice President Mike Pence’s recent broadsides against China in Washington, D.C. and at the APEC summit in Papua New Guinea didn’t lack for specifics.

Even so, two things need to be kept in mind. First, and contrary to current thinking, the U.S. wasn’t wrong to engage with communist China in the 1990s and welcome it into the global trading system. Not all of the architects of this policy (which commanded bipartisan support) took it for granted that engagement would produce a more liberal China. Rather, they thought it would serve U.S. interests better than an effort to exclude and isolate. And they were almost certainly correct.

Second, though China poses challenges and its government doesn’t share the West’s liberal values, mischaracterizing the threat doesn’t help to address it. It’s true, for instance, that the Belt and Road program has fueled corruption, debt and white-elephant infrastructure projects — but this is due to lack of planning and coordination rather than a plot to entrap victims and seize their strategic assets. It’s true that China is building a surveillance state and exporting some of the technology abroad — but it’s hyperbolic to say that its proposed “social credit score” is intrinsically totalitarian. It’s true that Chinese military spending and capabilities are growing rapidly — but they’re still dwarfed by those of the U.S.

Here’s the main thing: Acting on the theory that China is a hostile revisionist power intent on supplanting the U.S. would be counterproductive. It would affirm the darkest views of China’s hawks. It would make accommodation on issues of vital mutual interest — trade, North Korea and climate change — harder, if not impossible. A new policy of exclude-and-isolate would further weaken beleaguered economic liberals within China. It would increase the risk that small incidents will be mismanaged and spiral into outright conflict. It would cause any number of self-destructive ideas — such as banning Chinese students from the U.S. — to proliferate.

The alternative isn’t to be meek. Unassailable military power is essential. Maintaining that capacity, and letting this be understood, is necessary, even if shows of force need to be carefully judged. Continuing to sail and fly wherever international law allows, including in the South China Sea, should be non-negotiable. Markers of this kind matter. For the same reason, the U.S. was right to join Australia in developing a naval base in the South Pacific.

Washington should help the Uighurs and other Chinese minorities through firmer diplomatic pressure and by engaging more purposefully on human rights at the UN. It should work more closely with universities and think tanks to guard against Chinese influence operations, and with companies to improve cyber-defenses and prevent the export of emerging technologies that might lend themselves to military uses.

The administration should be bolstering not undermining institutions such as the World Trade Organization, enabling them to bind China more securely to global rules. Moves to screen Chinese investments in U.S. technology companies, and to expand U.S. investments in infrastructure abroad through the new International Development Finance Corporation, are entirely justified. All of this should be coordinated with allies, which share many of the same concerns.

China is entitled to strive for economic growth — and its success in that endeavor need pose no threat to the U.S. But if China hopes to remain part of the liberal trading order, it ought to accept its rules, which impose obligations on governments to maintain open markets. Industrial policies that put foreign producers at a disadvantage violate the spirit and often the letter of agreements that China has signed up to. That needs to change — and it can, especially if the U.S. cooperates with Europe and other allies. Given time, China is likely to realize that throwing money at Chinese startups and coercing foreign investors into handing over technology aren’t the best methods of encouraging domestic innovation. The smartest way for the U.S. to advance this prospect would be to join the revamped Trans-Pacific Partnership that it foolishly abandoned.

Trump and his officials present a parody of self-confidence. What America and its friends need is less strutting and more conviction. The values that underpinned U.S. global leadership for decades aren’t out of date. There’s no cause for a strong and prosperous America to see China as a mortal threat — and every reason to avoid making it one. The meeting in Buenos Aires is a chance to mend this world-shaping relationship. Both leaders ought to seize it.